Why Aereo Should Win at the Supreme Court (Guest Column)
Shawn DuBravac is the chief economist and senior director of research for the Consumer Electronics Association, the U.S. trade association representing more than 2,000 consumer electronics companies. Connect with him on Twitter @TwoOpinions.
When the U.S. Supreme Court hears the case American Broadcasting Companies Inc. v. Aereo Inc. on April 22, justices will begin to decide whether the retransmission of copyrighted video content to paid subscribers is a "public performance." For all of us who watch TV -- and that's almost every one of us -- this means the court will have the final say on when, where and how we enjoy our favorite programs in the decades to come.
Before diving into the future of television, let's start with a closer look at how home theater entertainment has reinvigorated the sagging movie industry. Last year, U.S. consumers spent $11.8 billion on Blu-ray Discs, DVDs and other forms of physical home entertainment. Add another $3.3 billion for digital downloads and video-on-demand and $3.2 billion more for subscription services like Netflix, and consumers are spending billions more to watch movies at home rather than in theaters.
The success of home theater entertainment and the massive boost it's giving Hollywood beyond the box office is remarkable given that studios tried to strangle home recording technology in its infancy. Think of the market opportunity we would have missed if the status quo prevailed in the landmark 1984 Supreme Court case Sony Corp. of America v. Universal City Studios -- a decision that would have made it illegal for you to record content at home for personal use. Instead, a fountain of innovative technologies has sprung from what became known as the Betamax decision -- technology that in turn opened the doors for the VCR, the DVD and even the DVR. In short, this case proved consumers want and deserve access to entertainment on their own terms.
Last year, moviegoers spent $10.9 billion at the box office in the U.S. and Canada, according to the Motion Picture Association of America. Fold in global audiences, and that number balloons to nearly $36 billion in annual box office sales. To put that into perspective, Americans spent about $1 billion at the movies annually in the 1960s and about $3 billion a year by the mid-1980s, when the Betamax case was decided.
Although 87 percent of U.S. households own a DVD player and 47 percent have a DVR, we're still going to the movies, and box office receipts continue to grow. Through this lens, the movies are a phenomenal story of American creativity and ingenuity, bringing entertainment to the masses, defining the popular culture and creating huge engines of economic growth all while enabling new technologies to enter the market and thrive. Case in point: The in-home entertainment market that didn't exist in 1981 (and survived by only a single vote in the 1984 Supreme Court case) outpaced the box-office market by an eye-popping 67 percent in 2013.
The lesson learned here? Innovative technology, like Betamax and its subsequent iterations, didn't kill the content industry; they enhanced and advanced it by giving us a choice. As it turns out, we're less interested in the "record" button -- Betamax's ability to copy content -- than we are in the "play" button, which lets us watch when and where we choose. Today, that "play" button represents a market one-and-a-half times the size of the box-office market and has doubled the motion picture industry's addressable market.
And history has a way of repeating itself. The Aereo case pits consumers' home entertainment rights against established industry powerhouses, echoing the Betamax decision. Aereo lets us stream broadcast television to a growing suite of personal devices -- laptops, tablets, smartphones, whatever -- creating a new market by extending today's television broadcasts. This service lets viewers watch TV wherever they want, when they want (sound familiar?), just by renting a tiny antenna housed remotely. This is the future of content delivery, as more than half of U.S. adults stream content on laptops, and roughly one-third stream content on smartphones and tablets, according to a Consumer Electronics Association study.
Broadcasters maintain that offering over-the-air (OTA) television transmission via a remote service will hurt their business models and it violates the federally established rules for providing OTA broadcasting. Some, like CBS and Fox, have even threatened to pull their OTA signals if the Supreme Court once again decides to support innovation and sides with Aereo. A win for broadcasters would most certainly hinder new technologies from entering the market, giving consumers what they clearly want: flexibility to access content on-demand. The result? Despite the growing number of devices we're now able to use to consume our favorite video content, we would be limited to far fewer choices.
Market disruptions that rattle the status quo often face difficulties. Just look at the recent challenges faced by innovative startups such as Uber, Makerbot and Tesla. But they also have the potential to spawn new businesses and opportunities. If the courts decide in favor of innovation and ingenuity, as they've done in the past, new technologies will thrive as long as they're "capable of substantial non-infringing use," to borrow a legal phrase from the Betamax case.
Laws -- and certainly the copyright laws -- were not intended to inhibit the introduction of new and innovative technologies. It shouldn't start now. The past is precedent. Legal support for innovation will create more choices for consumers, expand the existing video industry and invigorate the U.S. economy. Let's not rule against a win-win-win.